---
title: "Cost-to-Serve: gaining profitability insights"
description: "Cost-to-Serve: gaining profitability insights"
---

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# Cost-to-Serve: gaining profitability insights

### Cost-to-Serve: gaining profitability insights

To pinpoint the full profitability of products or customers across the supply chain, net margin analysis, also known as cost to serve (CTS), can help. CTS is a modeling technique that **offers insight into every cost an organization incurs in the process of delivering a product or service to a customer**.

Unlike traditional accounting methods, which calculate gross margin by subtracting the cost of goods sold from the net sales value, CTS unveils the cost of every customer-driven action – from order receipt and product delivery all the way to the customer’s shelf. Introducing net margin analysis into your accounting and control processes enables you to provide a full P&L down to the net margin by business dimension. **As a result, it’s the ultimate data source for advanced profitability analytics**.

Use cost to serve to:

- draft an action plan to turn unprofitable products or customers into profitable ones;
- modify manufacturing or logistics processes to optimize efficiency;
- adapt commercial strategies by modifying pricing and discounting, renegotiating contracts, restructuring distribution channels or abandoning specific products, services or customers.

CTS analysis is not a one-off exercise. As businesses today are changing at lightning speed, it is key for you to **continuously review the outcomes of the actions taken and reassess and adjust them wherever needed**.

*“CTS unveils the cost of every customer-driven action – all the way from order receipt and product delivery to the customer’s shelf.”*

 

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